N.N.
GLOBAL JUDGMENT (2023) – FAQs
- Ankit Virmani and Shreya Mathur
Q1 - What has the Supreme Court held in N.N.
Global Mercantile Pvt. Ltd. v. Indo Unique Flame
Ltd. and Ors. (2023 SCC OnLine 495)?
In this recent ruling dated 25th April 2023, a
Constitution Bench (comprising five Judges) of the
Supreme Court has, by a majority of 3:2, among
other things, decided that:
a. an arbitration clause contained in an unstamped
or insufficiently stamped agreement is not valid
and does not ‘exist’ in law;
b. High Court or the Supreme Court cannot appoint
an arbitral tribunal on the basis of such
arbitration clause in an application under
Section 11 of the Arbitration and Conciliation
Act, 1996;
c. the Court is duty-bound to instead impound the
agreement under the provisions of stamp law;
d. the Court can act upon the agreement and
appoint the arbitral tribunal only after the
requisite stamp duty (along with penalty, if any)
is paid on such agreement and an endorsement
to this effect is made on such agreement under
the provisions of stamp law;
e. if however, the objection as to insufficiency of
stamp duty appears unfounded or requires
greater enquiry, the Court may refer the matter
to arbitration, and leave the question of
sufficiency of stamp duty open for the arbitral
tribunal to decide.
Q2 - Does this judgment apply even to existing
arbitration agreements?
Yes. The judgment applies to all arbitration
agreements - whether existing or future. This is
because this judgment does not specify that it will
only apply to future agreements.
Please note that a judgment only interprets the law
as it exists, and does not create new law. Once a
judgment is passed, the interpretation given by it
would relate back to the date when the provision
being interpreted came into force, unless the
judgment specifies to the contrary. (See: Manoj
Parihar v. State of J&K, 2022:INSC:653)
Q3 - Does this judgment apply to arbitration
agreements providing seat of arbitration outside
India?
This judgment was in the context of an application
before the High Court or Supreme Court under
Section 11 for appointment of arbitrator. Such
application would lie only if the seat is in India, and
not where the seat is outside India. This judgment
therefore, does not strictly apply to arbitration
agreements providing seat of arbitration outside
India.
It is pertinent to note however, that there can be
several scenarios where an agreement containing an
arbitration clause with a foreign seat, may be
chargeable with stamp duty under Indian stamp
laws. E.g. -
a. if such agreement is executed in India;
b. if the agreement is executed outside India, but is
brought into India, AND relates to (i) property in
India or (ii) to any matter or thing done or to be
done in India.
e.g. – if the agreement relates to a property in
India and is brought into India for filing an
application for interim measures under Section
9 of the Arbitration and Conciliation Act, 1996 to
secure such property, then stamp duty may have
to be paid on the agreement on bringing it into
 N.N. GLOBAL JUDGMENT (2023) – FAQs
- Ankit Virmani and Shreya Mathur
India. If stamp duty is not duly paid before filing
the agreement in the Indian Court, such Court is
empowered and duty-bound to impound the
agreement under stamp laws. Please also see
answer to Q7 below.
Q4 - If the Agreement is impounded, would penalty
be payable in addition to deficient stamp duty?
Yes. Penalty of up to 10 times the amount of
deficient stamp duty may be imposed, in addition to
the deficient stamp duty.
Q5 - Does this judgment apply to Work Orders,
Purchase Orders, agreements entered into by
exchange of emails or other correspondence, etc.?
Yes. This judgment would apply to any instrument
chargeable to stamp duty and which contains an
arbitration clause.
Further, please note: Indian Stamp Act, 1899
provides that if one letter forming part of an
exchange of correspondence between parties bears
proper stamp duty, then the agreement arrived at
through exchange of such correspondence would be
considered a duly stamped instrument.
Q6 - Does this judgment apply to stand-alone
arbitration agreements (not contained within any
other agreement)?
An arbitration agreement is itself chargeable to
stamp duty under the Indian Stamp Act, 1899 (this
fact is noticed in the judgment also). This judgment
therefore, applies to a stand-alone arbitration
agreement also.
Q7 - Would this judgment come in the way of an
application seeking urgent interim measures under
Section 9 of the A&C Act if the arbitration clause is
contained in an unstamped or insufficiently stamped
agreement?
While the judgment specifies that it does not apply
to a petition filed under Section 9 (para 116 of the
opinion authored by Justice K.M. Joseph), yet in our
view, since an arbitration agreement contained in an
unstamped or insufficiently stamped agreement
cannot be treated as a valid and enforceable
contract per in this judgment, then maintainability
of S.9 proceedings (which are predicated on
existence of a valid arbitration agreement) would
also be doubtful.
It would be interesting to see how S.9 applications
are dealt with by Courts after this judgment. We will
put out an update on this in future.
Q8 – What steps should one take now if their
agreement containing arbitration clause is
unstamped or insufficiently stamped?
While some possible steps may include submitting
the document for adjudication to Collector, or filing
Section 11 proceedings where the document can be
impounded and duty assessed and levied, the steps
that one should take will vary from case to case.
Please consult a lawyer for the steps that you should
take in a specific case.
THIS NOTE IS SOLELY FOR INFORMATIONAL PURPOSES AND
DOES NOT CONSTITUTE LEGAL ADVICE.
For advice on any specific legal query, please contact us at:
Ankit Virmani Shreya Mathur
Partner Senior Associate
ankit@virmani.in shreya@virmani.in
91- 99200 90570 91- 85270 80105
Our Address:
Virmani & Virmani
1, Link Road, 2nd Floor, Jangpura Extension, Delhi - 110014.